History of Salesforce (1999): founders, timeline, facts

Salesforce is a company that in 1999 in San Francisco began selling software for sales departments not in a box but as a subscription through the browser, under the slogan \"No Software.\" By its IPO in 2004 it had about 9,800 customers and $96 million in annual revenue, and it showed its first profit only in its fourth year of sales. It remained an independent public company.

In brief

Salesforce is a company founded in February 1999 by former Oracle senior vice president Marc Benioff together with the programmers Parker Harris and David Moellenhoff. It sold its sales-tracking software not as a license with an installation but as a subscription through the browser, presented this as the end of software, and registered the slogan as a trademark. By its IPO in June 2004 it had about 9,800 customers and $96 million in annual revenue, but it showed its first profit only in the year that ended in January 2004.

How it started (the founders)

Benioff worked at Oracle from 1986 to 1999, his last title being senior vice president. Harris and Moellenhoff had run Left Coast Software together since 1996, a small Java consulting firm; by the time Salesforce was founded, Harris held the post of vice president there and Moellenhoff that of president. The result was a typical pairing: a salesman with the market in his head and two technical people who knew how to build web applications. The company was incorporated in Delaware in February 1999.

The money came quickly and in small pieces. In April 1999 the first series of shares went for $0.02 a share, for $517,000, together with a convertible loan of $62,875 from Benioff himself; in June 1999 came $3.8 million, in November $13.2 million, and from March 2000 to June 2001 another $46.9 million, about $64.4 million in all before the IPO. Among the major shareholders at the IPO, Halsey Minor (10.0%) is named; a director since March 1999 was the venture investor Magdalena Yesil.

Larry Ellison's role in this is murky in the documents. In June 2000 Techdirt wrote that Benioff had earlier invited Ellison to join the board and asked him to invest $2 million of his own money, and was now asking him to leave; Business Insider later repeated the same amount. But the 2004 IPO prospectus does not mention Ellison at all, neither among the directors nor among the major holders. See "Legend vs. the record."

Year-by-year timeline

1999-02: Salesforce is incorporated; co-founders Benioff, Harris, and Moellenhoff fact
1999-04…11: three rounds of $0.5 million, $3.8 million, and $13.2 million; Benioff converts his loan into shares fact
2000-02: launch of the first service; on the same day, according to later retellings, a stunt at a Siebel conference with actors as "protesters" estimate
2000-06: Techdirt: Benioff asks Ellison to leave the board because Oracle had moved in the same direction; according to a later retelling, this meant a direct competitor estimate
2001-02: on the home page: the first 5 seats free for 12 months, the rest at $50 a month, phone number 1-800-NO-SOFTWARE fact
FY2001 (through 2001-01-31): revenue of $5.4 million with a net loss of $31.7 million, about 1,500 customers fact
FY2002: revenue of $22.4 million, a loss of $28.6 million, about 3,500 customers fact
FY2003: revenue of $51.0 million, a loss of $9.7 million, but operating cash flow is already positive at $5.2 million (a year earlier, negative $13.2 million) fact
2003-06: launch of sforce, a programming interface for third-party developers fact
FY2004 (through 2004-01-31): revenue of $96.0 million, a first annual profit of $3.5 million, about 8,700 customers fact
2004-06-23: IPO on the NYSE under the ticker CRM at $11 a share: 10 million shares, 11.5 million with the underwriters' option, and $126.5 million in gross proceeds, $113.8 million net fact
2005-09: AppExchange, a directory of third-party applications, is shown at Dreamforce; FY2006 revenue of $309.9 million, a profit of $28.5 million unverified
2007-09: Force.com is announced at Dreamforce, a platform for applications beyond CRM; according to Benioff, it would be available in mid-to-late 2008 estimate
FY2008: $748.7 million in revenue, about 41,000 customers, 1.1 million paid seats

Lesser-known but significant facts

Cash flow arrived before profit. In FY2003 the company was still losing $9.7 million, but operating cash flow was positive ($5.2 million): customers paid in advance under non-cancelable 12–24-month contracts, and deferred revenue grew from $7.1 million to $19.2 million in a year.
The advertising bill for the launch. In FY2001 marketing, above all advertising, made up 62% of all sales and marketing expenses, and in FY2002 47%; the FY2001 loss ($31.7 million) was 5.8 times revenue ($5.4 million).
Even in 2004 the IPO prospectus called the market unproven. The company that later became the symbol of the cloud cautioned in its own prospectus that the market might never develop at all.
Churn is not disclosed in the prospectus. There is no churn figure in either the S-1 or the 10-K for FY2005: there is only a caveat that it is higher among small customers (<200 employees).
An interview in the New York Times made it into the prospectus's risk factors. A long piece on Benioff came out on 2004-05-09, during the quiet period before the IPO; the prospectus notes the risk of premature promotion of the offering (gun jumping): if the publicity were judged a violation, the company could be required to buy back the shares it had sold.

Legend vs. the record

Legend: Salesforce invented SaaS. The record: the 2004 prospectus names NetSuite, RightNow, and Salesnet as competitors in the on-demand model, and British Telecom, Corio, and IBM as corporate ASPs; NetSuite, moreover, was incorporated in 1998, a year earlier. Verdict: Salesforce was not the first subscription company and not the only one in its class; its achievement was the "No Software" brand (the trademark is in the S-1) and going public in 2004, three and a half years before NetSuite. Who was first in time depends on how "SaaS" is defined, and we do not settle it here.
Legend: cloud software was profitable from the very beginning. The record: the FY2001 loss was $31.7 million on revenue of $5.4 million, FY2002 $28.6 million, FY2003 $9.7 million; the accumulated deficit by April 2004 was $71.5 million; the first profitable fiscal year was FY2004 ($3.5 million). Verdict: the legend is false. The subscription brought cash flow before profit (FY2003 already showed a positive $5.2 million), but not profit from day one.
Legend: Ellison created / funded Salesforce. The record: the only figure is $2 million, per Techdirt in 2000 and retellings, whereas before the IPO the company raised about $64.4 million, and Ellison is not in the prospectus. Verdict: Ellison's contribution can be neither confirmed nor ruled out from the company's documents; more likely a small early check followed by a falling-out than "Ellison's money" as the foundation estimate. For comparison, at NetSuite he was the controlling owner, ≈61% as of 2007 per NetSuite's S-1/A.
Legend: "No Software" was launched as a fake protest at Siebel, and that was enough to get started. The record: the slogan was registered as a trademark, and the 2001 site shows 1-800-NO-SOFTWARE; marketing, above all advertising, made up 62% of sales and marketing expenses in FY2001. The stunt with actors itself is known only from later retellings. Verdict: the slogan and the noise were real, but the claim that a fake protest was enough is wrong: behind the launch stood paid marketing and free entry for five users estimate.

The first growth lever

The first lever was not the product but the packaging and the price of entry. On the 2001 home page: the first five seats free for a year, then $50 per seat per month, no hardware and no installation, phone number 1-800-NO-SOFTWARE. The customer base grew like this: about 1,500 customers in FY2001, 3,500 in FY2002, 5,700 in FY2003, 8,700 in FY2004, and 13,900 in FY2005. Revenue meanwhile grew 4.1 times in FY2002, then 2.3, 1.9, and 1.8 times.

This came at a high cost: marketing, above all advertising, made up 62% of sales and marketing expenses in FY2001, and sales and marketing together ate up 66% of revenue in FY2003 and 57% in FY2004. The money was recouped through 12–24-month contracts, non-cancelable and paid in advance. The second lever was the platform: sforce (2003), AppExchange (2005), and Force.com (2007) turned customers and third-party developers into an ecosystem.

The paired story

The shared plot. Both companies sold business software by subscription through the browser, both were founded in 1998–1999, and both had headquarters in California: Salesforce in San Francisco, NetSuite in San Mateo (Salesforce was incorporated in Delaware, NetSuite in California until 2007). The Salesforce prospectus explicitly names NetSuite as a competitor in the on-demand CRM class.
Ellison. At NetSuite he was the controlling owner: per the 2007 S-1, through Tako Ventures and then an LLC, he held about 61% of the shares; a figure of about $125 million is given only by retellings rumor. At Salesforce he was an early private investor with $2 million, per retellings, who does not appear in the prospectus. The upshot: money and control at NetSuite, a small bet and a falling-out at Salesforce.
The contrast in outcome. Salesforce went public in 2004 at $11 and remained independent; NetSuite was sold to Oracle: the deal was announced on 2016-07-28 at $109 a share, ≈$9.3 billion, and closed on 2016-11-07.
The contrast in market. Salesforce started with CRM for salespeople, NetSuite with accounting and ERP for small businesses; they converge in the 2000s on small and midsize companies.

Parallels today (projects from the catalog)

Breakcold (breakcold): a CRM for salespeople and agencies, sold by subscription. It is the same product Salesforce had in 2000, but now with AI and messengers instead of Outlook and Palm, and the same fight against bulky CRMs. view this project's dossier →
Kometrics (kometrics): subscription business metrics from Stripe and other payment services. It is today's counterpart of what Salesforce counted in its S-1 (customers, paid seats, deferred revenue) and what was counted by hand back then. view this project's dossier →

What a builder can take from this in 2026

Name an enemy, not a category. "No Software" is not a description of the product but a contrast; it was registered as a trademark and spelled out in the phone number.
Offer free entry, but with a timer. Five seats for 12 months and $50 for each additional one is a model that today would be called freemium, but with a predictable end to the free period.
Payment up front matters more than profit. 12–24-month contracts and money up front produced positive cash flow a year before profit; track deferred revenue, not just net income.
Do not confuse noise with cause. The stunt at a competitor's conference is what people remember, but marketing, above all advertising, made up 62% of sales and marketing expenses in FY2001; for you, noise without a budget will not replace a channel.
Open up the platform once the core is holding. sforce, AppExchange, and Force.com came in the 5th to 9th years, when there were already more than 5,700 customers.

Discrepancies and what we could not verify

Ellison's $2 million: Techdirt in 2000, CNN Money in 2003, and Business Insider; none of these publications cites a document, and there is no primary source; Ellison's name does not appear in the 10-K for FY2005, FY2006, or FY2008 or in the S-1 estimate.
The date Ellison left the board: sources differ; he is no longer there in the 2004 S-1 unverified.
The number of co-founders: three per the S-1, four per Wikipedia (Frank Dominguez) rumor.
The stunt at Siebel, 2000-02: only later retellings, with the date 2000-02-22 in one of them estimate.
The purchase of NetSuite: $109 a share, ≈$9.3 billion per Oracle's press release, closing on 2016-11-07 per NetSuite's 8-K. Ellison's figure at NetSuite (≈$125 million) comes only from retellings rumor.
Customer churn: there is no figure in the S-1 or in the 10-K filings through 2008.
The exact launch days of AppExchange and Force.com: AppExchange in September 2005 per the 10-K, Force.com in September 2007 per the press; the days are not confirmed unverified.

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